Supreme Court New South Wales Medium Neutral Citation: Coolangatta Property Pty Ltd v Emily Dyason [2011] NSWSC 929 Hearing dates: 07/06/2011 Decision date: 07 June 2011 Jurisdiction: Equity Division - Duty List Before: Brereton J Decision: Defendant's application for security for costs dismissed. Catchwords: SECURITY FOR COSTS - Applicant relies on corporate impecuniosity ground - no evidence to satisfy ground - strength of case - proportion of costs to issues in dispute small - great delay by defendant in bringing application - no evidence as to quantum - application refused. Legislation Cited: (NSW) Uniform Civil Procedure Rules 2005, r 42.21(1)(d) (CTH) Corporations Act, s 1335(1). Cases Cited: Litmus Australia Pty Ltd (in liq) v Paul Brian Canty and Ors [2007] NSWSC 670 Maritime Services Board v Citizens Airport Environmental Association (1992) 83 LGERA 107 Merribee Pastoral Industries Pty Ltd v Australian & New Zealand Banking Group Ltd 193 CLR 502 Pearson v Naydler [1977] 3 All ER 531 Category: Procedural and other rulings Parties: Coolangatta Property Pty Ltd (plaintiff/respondent) Emily Dyason (defendant/applicant) Representation: Counsel: Mr L Brazel (plaintiff) Mr L P Dyason (in person - by leave for the defendant) Solicitors: Bolster & Co (plaintiff) File Number(s): 2010/37720 Judgment (EX TEMPORE) 1HIS HONOUR: The substantive proceedings were commenced on 24 June 2009 by Statement of Claim filed in the Local Court at Byron Bay, by which the plaintiff Coolangatta Property Pty Ltd, which traded as L J Hooker Murwillumbah, sues the defendant Ms Emily Dyason for a sum of $13,797.64, being commission said to be due by the defendant to the plaintiff pursuant to a Selling Agency Agreement entered into between the parties in connection with a property at Tumbulgum. 2Under the Selling Agency Agreement, the plaintiff was given an exclusive agency from 1 September 2008 to 31 January 2009, and thereafter non-exclusive selling rights by which the agent would be entitled to commission if it effectively introduced to the principal or the property a purchaser who subsequently entered into a binding contract. The contract also provided that the fee would be due and payable on completion of the sale, or upon demand if the sale was not completed owing to default of the principal after the parties had entered into a binding contract, or if after the making of the contract the principal and the purchaser mutually agreed not to proceed with the contract. 3The plaintiff claims that on or about 15 January 2009 - that is to say, during the exclusive agency period specified by the agreement - it introduced IIB Australia Pty Ltd to the principal. It further claims that on 12 February 2009 - that is to say, after the expiration of the exclusive agency period - IIB and the defendant entered into a contract for sale of the property, and that on or about 25 February 2009 IIB and the defendant mutually agreed not to proceed with the contract. On that footing, the plaintiff says it is entitled to its commission. 4While the defendant says that it cannot be that an agent is entitled to commission in respect of a sale that did not take place, that argument overlooks the provision in the contract which makes commission payable if, after the making of the contract, the parties mutually agree not to proceed with it. The defendant also contends that the plaintiff did not effectively introduce IIB Australia to the principal, pointing out that IIB is a company, the principal of which is the defendant's father, and that the defendant's father already well knew his daughter, the defendant, and the subject property. At first sight that appears a strong argument. On the other hand, it also appears from the evidence that the offer of purchase was made by IIB through the plaintiff agent and that it might, therefore, be arguable on that footing that there was an effective introduction. That, I think, is a matter that will have to be resolved at trial, and seems to be the central issue in the case and it is a great pity, given the small amount in dispute, that it could not be resolved today as I would have been happy, had the parties been in a position to do so. 5By Notice of Motion filed on 31 May 2011, the defendant seeks security for its costs of the proceedings. Although it has not been precisely identified, it would seem that the ground relied on is that shortly described as 'corporate impecuniosity' - namely, that there is reason to believe that the plaintiff, being a corporation, may, if unsuccessful in the proceedings, be unable to meet a costs order against it. Establishing such a ground, which is reflected in (NSW) Uniform Civil Procedure Rules (2005) r 42.21(1)(d) and in (CTH) Corporations Act s 1335(1), is a jurisdictional prerequisite to the making of an order for security for costs, 6It has often been said that this is a relatively undemanding test. In Pearson v Naydler [1977] 3 All ER 531 , Megarry VC observed at 535: In the case of a limited company, there is no basic rule conferring immunity from any liability to give security for costs. The basic rule is the opposite. 7On the other hand, it is a test that requires some evidence to surmount it. In this case the evidence relied on to establish impecuniosity amounts, as I understand it, to this: first, that the plaintiff is no longer carrying on its business from its shop, but has closed the business down; and secondly, that a credit rating report issued by a commercial agency asserts that using its formula the plaintiff has a "relative risk 99.9 times worse than average". 8The fact that the plaintiff is no longer carrying on business at least from its former Murwillumbah office, says very little, if anything at all, as to its ability to meet any adverse costs order made against. It says nothing as to what the respective assets and liabilities of the plaintiff are. 9The credit report explains that the "relative risk" score "is a statistical ranking tool only and as such should always be used in conjunction with credit policies and procedures and other relevant information you may have about the company or business", and should not be - and is not intended to be - the sole basis for making a decision about whether or not to deal with a particular company or business. 10In short, I have no evidence as to what are the assets of the plaintiff, no evidence as to what are its liabilities, no evidence as to its income and no evidence as to its expenses. While it might well be said that such evidence is in the possession of the plaintiff, in this type of case or application it is anticipated that the defendant will at least make some effort to elicit such material, whether by subpoena, notice to produce, or at the very least an enquiry inviting the plaintiff to put its financial position before the Court. There is none of that here. In those circumstances, I simply cannot be satisfied that there is reason to believe that the plaintiff may be unable to meet an adverse costs order if unsuccessful in the proceedings. Hence the jurisdiction to make an order for security for costs under UCPR r 42.21(1)(d) is not enlivened. 11It is, therefore, strictly unnecessary to deal in any detail with the relevant discretionary considerations relevant to whether to exercise any jurisdiction to order security for costs, but I shall comment briefly on them. 12So far as the strength of the plaintiff's case is concerned, generally speaking, on an application for security for costs, a Court will not enter into a close evaluation of the relative strengths of the cases. If a proceeding appears hopeless and bound to fail, the apparent lack of merit of a plaintiff's case could be a reason for ordering it to provide security [ Merribee Pastoral Industries Pty Ltd v Australian & New Zealand Banking Group Ltd 193 CLR 502, 514 (Kirby J)]. Here, it certainly cannot be said that the plaintiff has a strong case; to the contrary, I think it has real difficulties, so far as the issue of "effective introduction" is concerned. But it cannot be said, on what is presently available to me, that the plaintiff's case is hopeless and bound to fail. As I have foreshadowed, there is some basis for its argument on the question of effective cause. 13Another significant discretionary consideration is the total amount in dispute and the total scope of the case. The proportionality of the costs to the issues at stake is also a relevant discretionary consideration [Maritime Services Board v Citizens Airport Environmental Association (1992) 83 LGERA 107]. The subject matter here is some $13,000. The case should be capable of being heard and determined in a couple of hours. 14The final - and, in my view, very important - discretionary consideration, is that this case has been on foot - in one form or another - since mid-2009, and in April this year was set down to be heard in August this year. This application is made much too late. It is well established that applications for security for costs, if they are to be made, should be made at an early stage [ Litmus Australia Pty Ltd (in liq) v Paul Brian Canty and Ors [2007] NSWSC 670, (White J) [25]]. No explanation has been put before the Court as to why this application is made so belatedly. 15For those reasons, there are powerful discretionary considerations against making an order for security for costs, even if the jurisdictional ground were established. 16A further significant difficulty for the defendant/applicant would have been the absence of any evidence as to an estimate of the costs that the defendant might incur between now and the hearing. Because of the relatively small amount in dispute in the case, I accept that one would not necessarily expect the defendant to seek out an expert solicitor to give a detailed assessment of those costs, but there is not even any evidence that the defendant intends to retain a solicitor. The defendant is represented today, as she has been in the recent past, by her father, who appears by leave. Furthermore, there is no evidence even as to the cost of bringing the defendant from her present location in the United Kingdom to Australia, and whether that is intended to be done. I simply cannot know what, if any, costs are going to be incurred in the further defence of the proceedings, nor make a sensible estimate as to what they might be, and even if jurisdiction had been established and the discretionary considerations favoured ordering security, the absence of evidence of quantum would have precluded me from making an order. 17I order that the motion be dismissed with costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 August 2011